A TextMyFood servers’ instruction screen shows pending requests sent via text message from customers.
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January 17, 2011 from WBUR

The menu at Charlie’s Kitchen, a dive bar in Cambridge, Mass., might not stand out for its cutting-edge cuisine. But the eatery is at the forefront when it comes to how customers can communicate with the wait staff.

A sticker on the wall of a corner booth says it all: “Can’t find your server, just text!”

Charlie’s is one of the first restaurants in the country to try TextMyFood, a new service that allows customers to communicate with their server via text messaging.

Five minutes after typing, “I’m at table 3. I want a tossed salad with ranch dressing,” a meal arrives at the table.

Check, Please

“There are pros and cons,” says Kristina Henry, a server at Charlie’s. “It’s great for a night like Friday night when we’re really busy. It’s packed and you’re running around [and] people text like, ‘Can I have my check please?'”

Even though TextMyFood may make her job easier, Henry says she finds the service impersonal.

“As a server, I would rather want to go to the guest and talk to them face to face and ask them what they would like instead of getting it through a computer,” she says.

Still, the technology doesn’t replace the server.

“It’s not eliminating human contact,” says Bob Nilsson, the president of TextMyFood. “There’s always a server at the other end. You just want to have that contact sooner. If you can’t see them and can’t make that contact, rather than waving your arms or getting up, just use the natural communication and let them know what you need.”

Nilsson says the goal of the service is to increase the amount of money customers will spend. For example, guests are more likely to order another round of drinks if they text the request in the moment. If they can’t find the server, they often pass.

But not everyone at Charlie’s Kitchen finds it useful to be able to text requests to their server.

“I guess it seems kind of pointless because I can tell my waitress to her face what I want to drink,” says customer Zach Brickett.

Prank Texts

Another customer, John McSweeney, wonders if people will abuse the system.

“It sort of occurred to me to maybe — just as soon as we ordered our beers — to take out my phone and be like, ‘Beers/stat/now,'” he says.

Prank texting is indeed a problem.

“I’ve gotten, ‘Glasses are sexy.’ I’ve gotten, ‘Two of us need something and three of us need your number,'” says Joshua DeCosta, another server at Charlie’s Kitchen.

In response, some establishments — where there’s a lot of heavy drinking — turn off the service after a certain hour. But other managers say they appreciate the ability to monitor guests.

If too many inappropriate texts come in from one person, it’s time to cut them off.

Time To Tip

It’s not uncommon for restaurant or bar patrons to have to wait to pay even though they have their check in front of them and their credit card out. That’s because servers aren’t always in sight.

Now, instead of waving, a text will do.

A few seconds after typing, “T3. My credit card is waiting,” into my phone, the server comes over to take my payment and smiles.

January 5, 2011

Clancy Martin is a tenured philosophy professor who used to sell luxury jewelry… and he wasn’t very honest about it.

The jewelry business — like many other businesses, especially those that depend on selling — lends itself to lies. It’s hard to make money selling used Rolexes as what they are, but if you clean one up and make it look new, suddenly there’s a little profit in the deal. Grading diamonds is a subjective business, and the better a diamond looks to you when you’re grading it, the more money it’s worth — as long as you can convince your customer that it’s the grade you’re selling it as. Here’s an easy, effective way to do that: First lie to yourself about what grade the diamond is; then you can sincerely tell your customer “the truth” about what it’s worth.

As I would tell my salespeople: If you want to be an expert deceiver, master the art of self-deception. People will believe you when they see that you yourself are deeply convinced. It sounds difficult to do, but in fact it’s easy — we are already experts at lying to ourselves. We believe just what we want to believe. And the customer will help in this process, because she or he wants the diamond — where else can I get such a good deal on such a high-quality stone? — to be of a certain size and quality. At the same time, he or she does not want to pay the price that the actual diamond, were it what you claimed it to be, would cost. The transaction is a collaboration of lies and self-deceptions.

December 31, 2010

Gift giving is a way for guests to celebrate your wedding and to help you stock your new home. Here’s what to keep in mind when making your bridal registry.

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What are you waiting for? Registering for wedding gifts should be one of the first tasks you tackle when you get engaged. Friends and relatives will be looking to buy wedding gifts as soon as he pops the question. Really! Take the guesswork out of gift buying by making sure they know what you want. You don’t need to complete your list just yet, but at least have a selection for guests to browse.

Hitting the stores together is essential. After all, the gifts are for both of you. To decide what you need, take inventory of the things you already have and see where the gaps are. Talk about the style of home you’d both like, and split up the final say (you could alternate items) to make it fair. (Maybe he gets to make final decisions on electronics, while you get to choose the kitchen stuff since you’re the chef.)

Don’t feel like you just need to register for china and flatware. Many stores have wedding registries now, so feel free to include whatever it is that will make your new house a home, be it electronics, appliances, or even camping equipment.

Try to avoid filling your list with things you’re never going to use. If you two aren’t the formal party types, then you probably won’t need a crystal punch bowl, as compelling as it may seem when you walk by with that registry scanner. Also, be extra-sure before you register for anything that’s monogrammed. Once your name is on it, you probably won’t be able to return it.

It’s always a good idea to inquire about a store’s exchange/return policies. The great thing is many wedding registry retailers have amazing customer service to accommodate to-be-weds’ needs (for example, you might suddenly realize that you don’t really have room for 24 chargers and want to return, say, eight of them). That said, being aware of the store’s return and exchange timelines will help you better plan and manage your registry.

As much as you may be hankering for that gorgeous $350-a-place-setting silver, be sure to register for items in a wide range of price points: under $50, under $75, under $100, under $200, and beyond, so all of your guests can choose gifts they can afford. You don’t want your college friend feeling overwhelmed by the fact that he can’t find a single gift; and on the opposite side, you don’t want your parents’ closest friends to have to buy you a multitude of smaller items to give you a generous gift.

At least one (and preferably all) of your registries should be available online. Guests should also be able to place their orders in person, over the phone, or by fax. If you’ve registered at a boutique retailer that doesn’t offer online services, you should be okay, as long as that’s not the only place you’ve registered. We live in a hectic world and you want to let guests be able to order you a gift — even if it’s 2 a.m.!

When a guest buys a gift for you, your registry should automatically update, allowing other guests to see what’s been purchased (and allowing you to see what’s on its way!). Make sure to revisit your registry often (trust us, you’ll be visiting several times a day once the wedding day nears), and update it with additional selections as products are purchased so that guests always have a variety of things to choose from. Aim to have at least twice as many items on your list as guests at your wedding.

Sure, some couples love receiving cash, but asking for it is not exactly Future Mr. and Mrs. Manners-approved. A more etiquette-friendly option? Try gift cards. Many stores allow you to register for them and you can use them to buy the things you want and need…later. If you are anxious for cash gifts, ask one or two close friends and immediate family members to politely spread the word.

Be gracious — let your guests know their gifts have arrived — promptly. Thank-you notes for gifts received before the wedding should be sent within two weeks of their arrival. Notes for gifts received on or after the wedding day should be sent within a month of your return from the honeymoon. In all notes, be sure to mention the gift by name.

Kai Ryssdal: There’s a big festival coming up on the Chinese calendar tomorrow: It’s called the mid-Autumn festival. For the past week or so, stores over there have been stocking up on the traditional gift of the season: Mooncakes. They’re pastries, small but rich, with a flaky crust and a sweet filling, usually made of lotus paste.

More than a billion people wanting the same thing on the same day? Smells like a business opportunity to me.

Rob Schmitz: Mooncakes have been likened to pastry hockey pucks. At around a thousand calories, they’re almost as dense. This helps explain why the Chinese don’t buy mooncakes for themselves. They gift them.

Shaun Rein is a strategy consultant in Shanghai.

Shaun Rein: It’s a way of showing respect to business partners and people you want to be close to, and it’s also a way to give them outright bribes.

Yes, bribes — and we’re not talking about briefcases full of mooncakes, but their paper representations, mooncake vouchers.

Here’s how it works: Buy a voucher from a company that makes mooncakes. Give it to your friend, client, local government official. And they, in theory, redeem the voucher for mooncakes. What most people do, though, is sell the vouchers on the black market for cash.

Rein: There’s no embarrassment about saying, “We don’t want this mooncake.” Let’s be pragmatic and get some money out of it.

And when a fifth of the world is in on this, that money becomes an underground economy worth billions.

Dozens of workers pack boxes of mooncakes at a Haagen-Dazs redemption center in Shanghai. Thirteen years ago, the company had an epiphany: They realized the Chinese give mooncakes, but many don’t eat them. It’s like the Christmas fruitcake dilemma in the West. So they thought: Why not make ice cream mooncakes? The ice cream mooncake was born.

Gary Chu manages the company’s China operation.

Gary Chu: It’s huge business. It’s a very important business for us. It’s growing at double digits every year.

Soon after, Starbucks, Nestle and Dairy Queen got into the business. This year, Haagen-Dazs sold 1.5 million boxes. To buy one, you’ll need $50 to $100 worth of vouchers. Want an ice cream mooncake this year? Sorry. Vouchers are sold out. Your only option is the black market.

A back-alley vendor named Yin Jing wears a fanny pack full of Haagen-Dazs mooncake vouchers. They’re made of thick paper; each one has a laser engraved hologram, just like currency. They float like currency, too. Last week, their price peaked. Now with just days to go before the festival, Mr. Yin is looking to unload.

Yin Jing: After the festival’s over, all these vouchers will be expired. So I have no choice. I’ve got to start dropping the price.

This selling frenzy reaches the highest levels of society. Just blocks away, a vendor who only gives his surname — Zhang — just negotiated a deal on reams of vouchers.

Zhang: These are all from government officials. They get so many as gifts, and they feel too embarrassed to sell them to me in person, so they ask their wives to meet me in a coffee shop.

Fresh from his secret government rendezvous, Zhang’s got his game face on, trying to sell all these vouchers before time runs out. If he fails? He’ll be forced to succumb to the spirit of the season by giving away dozens of boxes of mooncakes and keeping a few for himself, at which point the giving will stop, and the losers of this annual game will be forced to eat.

December 28, 2010

ORLANDO, Fla. — Deep in the bowels of Walt Disney World, inside an underground bunker called the Disney Operational Command Center, technicians know that you are standing in line and that you are most likely annoyed about it. Their clandestine mission: to get you to the fun faster.
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To handle over 30 million annual visitors — many of them during this busiest time of year for the megaresort — Disney World long ago turned the art of crowd control into a science. But the putative Happiest Place on Earth has decided it must figure out how to quicken the pace even more. A cultural shift toward impatience — fed by video games and smartphones — is demanding it, park managers say. To stay relevant to the entertain-me-right-this-second generation, Disney must evolve.

And so it has spent the last year outfitting an underground, nerve center to address that most low-tech of problems, the wait. Located under Cinderella Castle, the new center uses video cameras, computer programs, digital park maps and other whiz-bang tools to spot gridlock before it forms and deploy countermeasures in real time.

In one corner, employees watch flat-screen televisions that depict various attractions in green, yellow and red outlines, with the colors representing wait-time gradations.

If Pirates of the Caribbean, the ride that sends people on a spirited voyage through the Spanish Main, suddenly blinks from green to yellow, the center might respond by alerting managers to launch more boats.

Another option involves dispatching Captain Jack Sparrow or Goofy or one of their pals to the queue to entertain people as they wait. “It’s about being nimble and quickly noticing that, ‘Hey, let’s make sure there is some relief out there for those people,’ ” said Phil Holmes, vice president of the Magic Kingdom, the flagship Disney World park.

What if Fantasyland is swamped with people but adjacent Tomorrowland has plenty of elbow room? The operations center can route a miniparade called “Move it! Shake it! Celebrate It!” into the less-populated pocket to siphon guests in that direction. Other technicians in the command center monitor restaurants, perhaps spotting that additional registers need to be opened or dispatching greeters to hand out menus to people waiting to order.

“These moments add up until they collectively help the entire park,” Mr. Holmes said.

In recent years, according to Disney research, the average Magic Kingdom visitor has had time for only nine rides — out of more than 40 — because of lengthy waits and crowded walkways and restaurants. In the last few months, however, the operations center has managed to make enough nips and tucks to lift that average to 10.

“Control is Disney’s middle name, so they have always been on the cutting edge of this kind of thing,” said Bob Sehlinger, co-author of “The Unofficial Guide: Walt Disney World 2011” and a writer on Disney for Frommers.com. Mr. Sehlinger added, “The challenge is that you only have so many options once the bathtub is full.”

Disney, which is periodically criticized for overreaching in the name of cultural dominance (and profits), does not see any of this monitoring as the slightest bit invasive. Rather, the company regards it as just another part of its efforts to pull every possible lever in the name of a better guest experience.

The primary goal of the command center, as stated by Disney, is to make guests happier — because to increase revenue in its $10.7 billion theme park business, which includes resorts in Paris and Hong Kong, Disney needs its current customers to return more often. “Giving our guests faster and better access to the fun,” said Thomas O. Staggs, chairman of Walt Disney Parks and Resorts, “is at the heart of our investment in technology.”

Disney also wants to raise per-capita spending. “If we can also increase the average number of shop or restaurant visits, that’s a huge win for us,” Mr. Holmes said.

Disney has long been a leader in technological innovation, whether that means inventing cameras to make animated films or creating the audio animatronic robots for the attraction It’s a Small World.

Behind-the-scenes systems — typically kept top secret by the company as it strives to create an environment where things happen as if by magic — are also highly computerized. Ride capacity is determined in part by analyzing hotel reservations, flight bookings and historic attendance data. Satellites provide minute-by-minute weather analysis. A system called FastPass allows people to skip lines for popular rides like the Jungle Cruise.

But the command center reflects how Disney is deepening its reliance on technology as it thinks about adapting decades-old parks, which are primarily built around nostalgia for an America gone by, for 21st century expectations. “It’s not about us needing to keep pace with technological change,” Mr. Staggs said. “We need to set the pace for that kind of change.”

For instance, Disney has been experimenting with smartphones to help guide people more efficiently. Mobile Magic, a $1.99 app, allows visitors to type in “Sleeping Beauty” and receive directions to where that princess (or at least a costumed stand-in) is signing autographs. In the future, typing in “hamburger” might reveal the nearest restaurant with the shortest wait.

Disney has also been adding video games to wait areas. At Space Mountain, 87 game stations now line the queue to keep visitors entertained. (Games, about 90 seconds in length, involve simple things like clearing runways of asteroids). Gaming has also been added to the queue for Soarin’, an Epcot ride that simulates a hang glider flight.

Blogs that watch Disney’s parks have speculated that engineers (“imagineers,” in the company’s parlance) are also looking at bigger ideas, like wristbands that contain information like your name, credit card number and favorite Disney characters. While Disney is keeping a tight lid on specifics, these devices would enable simple transactions like the purchase of souvenirs — just pay by swiping your wristband — as well as more complicated attractions that interact with guests.

“Picture a day where there is memory built into these characters — they will know that they’ve seen you four or five times before and that your name is Bobby,” said Bruce E. Vaughn, chief creative executive at Walt Disney Imagineering. “Those are the kinds of limits that are dissolving so quickly that we can see being able to implement them in the meaningfully near future.”

Dreaming about the future was not something on Mr. Holmes’s mind as he gave a reporter a rare peek behind the Disney operations veil. He had a park to run, and the command center had spotted trouble at the tea cups.

After running smoothly all morning, the spinning Mad Tea Party abruptly stopped meeting precalculated ridership goals. A few minutes later, Mr. Holmes had his answer: a new employee had taken over the ride and was leaving tea cups unloaded.

“In the theme park business these days,” he said, “patience is not always a virtue.”

May 19, 2010

The late Oscar Levant — American pianist, composer, actor, hypochondriac, and world-class neurotic — once remarked, “There is a thin line between genius and insanity. I have erased that line.” As Levant saw it, this blur gave him creative impetus. Just as Levant achieved renown by navigating the lighter and darker sides of his imagination, couldn’t the same be said of great entrepreneurs?

To be truly great, entrepreneurs need to be a little…out there. After all, fearless creativity, maverick thinking and risk taking seldom show up in the middle of the bell curve. As venture capitalists, we see our fair share of aspiring and veteran entrepreneurs, and have often wondered if the man or woman standing before us was brilliant, deluded, or a combination of the two. In one of my previous posts, I explored the relationship between our strengths and weaknesses and how they are often one in the same: your strength is often your weakness and your weakness is often your strength. The goal is to find the optimal balance between the two.

Perhaps one of the most important and delicate balances that great entrepreneurs must finesse is the one between risk-taking and vulnerability. Now, the term “vulnerability” typically carries with it a host of negative connotations. If a risk-taker is generally perceived as bold, driven and admirably extroverted, a “vulnerable” person is apt to be seen as gentle, weak, introverted and easily assailable. Yet here’s the paradox: vulnerability is among the defining characteristics of the greatest entrepreneurs I know. Inside these people lies an inner, highly nuanced vulnerability that actually buttresses their externally directed strength.

The nuance lies in the type of vulnerability that they have and their recognition and comfort with it. Let’s be clear: there is a vital difference between what I call passive and active vulnerability. Passive vulnerability refers to the condition of being vulnerable without choosing to be. Active vulnerability comes from engaging in a contemplated risk that considers and hopes for the payoff, financial or otherwise will be worth the effort. Active vulnerability is in essence proactive and informed risk-taking. Passive vulnerability is reactive and submissive exposure.

But with that said, you might wonder, would anyone in his or her right mind “choose” to be vulnerable? Asking that question may be the reason why you are probably not an entrepreneur! The willingness to be vulnerable isn’t driven by the desire for exposure, but by the possibility of what that exposure might lead to — be it a meaningful role, the possibility to affect change, and, of course, greater financial gain.

The test of a great entrepreneur is one who can continue in the face of failure and does not fall prey to passive vulnerability. Lavant’s “thin line” for many entrepreneurs is the one between resilience and vulnerability. There are many would be entrepreneurs who have tried an idea and failed and never been able to get going quite in the same way. What was once once active vulnerability turns passive. Others surf the line between resilience and vulnerability successfully, understanding that repeated failure is usually necessary to achieve success. Some even thrive as much on the failure (and the learning and strength that can come with it) as on success. As VCs we try to understand how entrepreneurs deal with active vulnerability and failure. If they fail, will they feel defeated or more determined than ever to try again? If they succeed, will they feel satiated, or still hungry and willing to take on new challenges, putting at risk their newly minted reputation?

The story of how inventor James Dyson went through 5127 prototypes and 5126 “failures” to get his massively successful vacuum cleaner “right” is the stuff of entrepreneurial legend. Dyson was fond of saying that the inventor and entrepreneur’s life is one of failure. Embracing vulnerability and its rewards — whether those are lessons from failed efforts or life-changing (even world-changing) success — that’s the stuff of great entrepreneurs.

| From The Economist print edition Pedestrians beware PEDESTRIANS in China are often terrorised by electric bicycles zipping along the country’s pavements. China’s authorities, too, seem to have been caught unawares by an industry that, like the bikes themselves, has emerged speedily and stealthily from the shadows: local output grew from a few thousand bikes a year less than a decade ago to more than 22m last year, along with millions of kits to turn ordinary bicycles into electric ones. Annual sales have reached about $11 billion. The government is suddenly paying attention—but its urge to regulate is pulling it in two different directions. More and more Chinese cyclists, it seems, would like a battery and motor to turn the wheels for them. Production of ordinary bicycles, which peaked in 2006 at nearly 80m units, has since fallen by more than 25%. But as with many businesses in China, the electric-bike industry is plagued by too much capacity, thin margins and variable quality. More than 2,600 firms had permits to make electric bikes last year, although only around 1,000 are thought to be using them. Most started as conventional bicycle-makers; others have come from the motorcycle business. The biggest manufacturer, Jiangsu Xinri Electric Vehicle Co, produced 1.8m “e-bikes” last year. Its lead is under threat from at least half a dozen other manufacturers. One rival, Tianjin Aima Science and Technology Co, says it is gearing up to make more than 5m bikes a year; Jiangsu Yadea Technical Development Co hopes to triple its sales to 3m this year. Manufacturers believe exports will grow quickly, especially to Europe and North America, which accounted for more than 70% of the nearly 1m bikes sent abroad in 2009. One in every eight bicycles sold in the Netherlands these days is electric. Better yet, Chinese manufacturers secured an average price of $377 per exported bike, compared with less than $100 three years ago and just $46 for a pedal bike. But the government is threatening to put a legislative spoke in the industry’s wheels. Until recently there were few laws regulating electric bikes: they do not need to be registered, nor do their drivers need a licence. Unsurprisingly, the 120m bikes in use are involved in a growing number of accidents. Almost 2,500 electric-bike-related deaths were recorded in 2007. At night pedestrians are at particular risk, because many e-cyclists drive without lights to save power. More than a dozen cities have introduced restrictions of one sort or another. In theory, the government has limited electric bikes’ top speed to 20kph (12mph), but in practice most can go much faster. Yet the government also wants to encourage electric bicycles to curb the pollution and congestion created by other vehicles. Local authorities in some cities have stoked sales by raising the price of permits for petrol-fuelled scooters or banning them altogether. The authorities are also trying to make e-bikes themselves greener: manufacturers are being compelled to invest in lighter materials and to replace lead-acid batteries with lithium ones. Market leaders such as Xinri and Yadea are partnering with universities to improve their technology. Some ambitious producers are talking about turning their hands to electric cars. Perhaps then their customers will stick to the roads.

May 11, 2010

EBay Inc.’s PayPal said it will partner with China UnionPay Co., China’s largest electronic-payment-service provider, to let Chinese consumers shop from overseas merchants, a move that opens a massive segment of the Chinese market for PayPal and presents new competition for eBay’s Chinese rival Alibaba Group.

PayPal also said it will double its work force in Asia to 2,000 by the end of the year.

A large portion of PayPal’s current business in China consists of transactions by eBay merchants based in China. The new partnership expands that business to China’s quickly growing consumer market, just as online shopping is taking off in China.

The deal highlights how eBay is using its fast-growing PayPal arm to take a second crack at the world’s largest market of Internet users. EBay largely withdrew from China in 2006, after losing out to rival auction site Taobao.com, a unit of Alibaba Group, which didn’t charge users for its service. Today, eBay’s Chinese marketplace business is run through a site called EachNet, but still has only a tiny share of the market.
[PAYPAL]

PayPal has been at the core of a wider turnaround effort by eBay, which has seen business slow in its core marketplace division. In the fourth quarter of last year, PayPal accounted for about a third of revenue. Analysts predict that PayPal, which benefits from a wider consumer shift toward online shopping around the world, could some day become eBay’s largest business.

Beginning in the third quarter, China UnionPay cardholders within China will be able to link their bankcard accounts with PayPal and access a network of nearly eight million online merchants world-wide, including U.S. retailers like Wal-Mart Stores Inc. and Zappos.com, a unit of Amazon.com Inc.

As a result, merchants around the world who accept PayPal payments and are willing to serve and ship to Chinese customers will be able to tap a base of millions of Chinese cardholders, most of whom don’t have, for example, a Visa card, though Visa Inc.-branded cards are also available in China.

Alan Tien, PayPal’s general manager in China, estimates there will be 150 million middle-class and affluent consumers and more than 300 million online shoppers in China by 2013. Though China is known as an exporter, “Chinese users will be a huge buying force,” he said in an interview.

PayPal says its partnership with China UnionPay will help users bypass a foreign-exchange regulation that limits cross-border transactions, essentially providing an online platform for China UnionPay, which it said “is already approved to conduct transactions by the relevant regulatory bodies in China.”

China UnionPay, which operates a bankcard-payment network, has relationships with hundreds of financial institutions in 90 countries and has issued 2.1 billion cards in 10 countries. Its partnership with PayPal leverages its core Chinese user base and PayPal’s merchant network to compete with e-commerce empire Alibaba Group, which has the leading market share by far in both online payment and online retail in China. Yahoo Inc. owns a 39% stake in Alibaba Group.

Still, the move won’t necessarily help PayPal build traction with Chinese shoppers who want to buy goods domestically. Currently, the largest destination for online shopping in China is Taobao.com, where most of the transactions are yuan-denominated sales between Chinese sellers and buyers. The site reported 200 billion yuan ($29 billion) of transactions on its site last year.

Transactions on Taobao are handled by Alibaba Group’s own online payment platform, AliPay, which JLM Pacific Epoch analyst Fiona Zhou estimates occupies 90% of China’s e-commerce payment market—far more than PayPal’s own Chinese payment platform, BeiBao, which is a wholly owned subsidiary of the company.

AliPay announced this week it has 300 million registered users and a daily transaction volume of over 1.2 billion yuan, and like Taobao, it doesn’t charge a commission for those transactions. It does, however, charge users a bank-processing fee. (PayPal charges a commission, but it says rates vary from country to country.)

Ms. Zhou at JLM Pacific Epoch says it is still too early for PayPal to see immediate benefits from the partnership, because the majority of goods purchased online in China are still domestic goods. “If you look at Taobao … overseas products still represent a small portion” of transactions, Ms. Zhou said.

Some U.S.-based e-tailers, too, are wary to sell products into China, because of shipping costs and the challenge of learning customs formalities.

Still, the appetite for products from overseas does exist. When Barnes & Noble Inc. unveiled the Nook in the U.S., Taobao sellers promising to carry the electronic readers back from the U.S. began taking pre-orders from Chinese consumers almost immediately.

China is PayPal’s largest market in Asia, where the company processed more than $6 billion in payments last year. The company estimates PayPal was used for $3.1 billion in transactions between foreign buyers and Chinese sellers in 2009, largely related to eBay purchases.

Write to Loretta Chao at loretta.chao@wsj.com and Geoffrey A. Fowler at geoffrey.fowler@wsj.com

HATFIELD, England—In a sprawling warehouse north of London, Web grocer Ocado Ltd. is making an expensive effort to bring high-tech methods to Internet operations that are often low-tech elsewhere.

Most online grocers fulfill Web orders by gathering goods from the shelf of a local supermarket and then loading them in a truck for delivery. But Ocado has developed a highly automated, centralized operation that dispatches products to 65% of British postal codes from a single warehouse.

The operation is spread across 9.2 hectares of floor space on an old airfield. Ocado has built a complex, automated system that gathers items using its own algorithm-driven system. Baskets travel along a 16-kilometer maze of conveyor belts, stopping at bagging stations where workers follow a computer’s directions, loading products and shipping off 90,000 orders a week with close to 99.9% accuracy.

Ocado labors in the long shadow left by companies such as Webvan, a San Francisco-based online grocery start-up that was founded in the late 1990s and extended its footprint rapidly using venture capital, but went bust in 2001.

Around that time, three former Goldman Sachs & Co. bankers started Ocado in a one-room office near London’s Victoria Station.

Now, after 10 years of steady growth, the company is considering what could be one of the biggest initial public offerings on the London Stock Exchange—estimated at up to £1.1 billion ($1.66 billion)—in the next two years.

Ocado has attracted £350 million in investment over the years, and it has high-profile backers, including consumer-goods giant Procter & Gamble Co., former U.S. Vice President Al Gore’s Generation Investment Management LLP, and Tetra Pak billionaire Jorn Rausing.

But the grocer faces some skepticism from analysts. They note that it still operates at a loss and relies heavily on a single retailing agreement with the upscale British supermarket Waitrose, whose parent company, John Lewis Partnership, holds 28% of Ocado as part of a pension fund.

Nonetheless, in unaudited figures released Monday, Ocado showed growing sales, diminishing operating losses and a jump in earnings before interest, tax, depreciation and amortization, or Ebitda.

Ocado had gross sales of £427.3 million for the 52 weeks ended Nov. 29, 2009, a 25% jump from the previous year. Though the online grocer operated at a loss of £14.4 million for the fiscal year, it posted £9.2 million in Ebitda, up from £2.2 million in 2008. The company’s operating loss narrowed 33% from the previous year.

On Monday, Ocado Chief Financial Officer Andrew Bracey attributed the improved performance to operational efficiency. “We have better availability, we have a longer range, we have fresher produce, and we’re able to deliver in a one-hour window,” he said.

Key to that is the high-tech system Ocado built in Hatfield to fulfill orders in the U.K, one of the fastest growing online grocery markets in the world thanks to the country’s bad weather, limited parking and widespread high-speed Internet access, among other factors.

At Ocado’s warehouse, orders flow in online, many via a popular iPhone application, and a computer system determines the fastest route each basket should travel through the distribution maze based on what groceries need to be packed.

The traffic-flow calibrations are the most complicated part of Ocado’s operation: All the routes are different, with colored totes passing one another at conveyer-belt intersections. The travel itinerary for each basket must ensure that small orders get out quickly and fragile items such as bread and eggs go in last.

Touch-screen computers that operate in English or Polish tell the workers, known as pickers, which product belongs where, and the system is constructed so the workers don’t have to walk or reach too far.

The Hatfield warehouse is the brainchild of Chief Executive Tim Steiner, who believed that superior technology would help Ocado “cost dominate” in a sector known for low margins.

Initially, the company tried bringing in outside logistics companies, but Mr. Steiner decided to build the system in-house, enabling Ocado to replicate the operation elsewhere.

Now, Ocado’s warehouse operates at only half of capacity and it could handle millions more in sales without a serious capital infusion, Mr. Bracey says.

One current U.S. operation that approaches Ocado’s is FreshDirect LLC. It sends out about 50,000 orders a week in the New York area from a central warehouse in Long Island City, but its operations aren’t nearly as technologically advanced as Ocado’s.

FreshDirect became profitable this year, but its CEO, Rick Braddock, says the company won’t consider an IPO until it has carried out a planned expansion.

The ingredient is a new “designer salt” whose crystals are shaped and sized in a way that reduces the amount of sodium consumers ingest when they munch. PepsiCo hopes the powdery salt, which it is still studying and testing with consumers, will cut sodium levels 25% in its Lay’s Classic potato chips. The new salt could help reduce sodium levels even further in seasoned Lay’s chips like Sour Cream & Onion, PepsiCo said, and it could be used in other products like Cheetos and Quaker bars.

At an investor conference Monday in New York, the company said it is committed to cutting its products’ average sodium per serving by 25% by 2015 and saturated fat and added sugar by 15% and 25%, respectively, this decade.

The designer salt is one of the latest and most intricate efforts yet by a food company to vault ahead of concerns among government officials about the possible health effects of the widespread use of sodium in processed foods.

Eating too much salt can contribute to high blood pressure, increasing the risk of heart disease. Most Americans consume about twice their recommended limit daily, according to the Centers for Disease Control and Prevention.

Pressure is growing on U.S. food companies to act, because most of the salt Americans consume is in processed foods. In January, New York City, as well as other cities and health organizations, called for restaurants and makers of packaged foods to cut salt 25% within the next five years.

Sodium intake recommendations may also be lowered substantially in new U.S. dietary guidelines this year. And First Lady Michelle Obama is pressing food companies to cut fat, salt and sugar in their products.

The new salt represents PepsiCo’s latest step to cut back on unhealthy ingredients in big sellers like soda and potato chips. The company has also switched from frying its potato chips in transfats to using sunflower oil, and it has boosted spending to $414 million in 2009 from $282 million in 2006 for product development. To lead the research effort, it has hired health experts and scientists, including Mehmood Khan, a former Mayo Clinic endocrinologist, and Derek Yach, a former World Health Organization chronic diseases chief.

By 2015, PepsiCo aims to cut sodium in its salty snacks 25%. “What we want to do with our “fun for you” products is to make them the healthiest “fun for you” products,” Chairman Indra Nooyi said. “We want our potato chips to be fried in the healthiest oils with the lowest salt.”

Cutting salt out of foods is difficult because it adds body to foods as well as enhancing flavor. In addition, little is understood about how salt is perceived on the tongue.
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“ They can have my salt shaker when they pry it from my cold dead fingers. ”

—Dan StlMo Smith

PepsiCo said it has had to dig deeper than other food makers that have reduced sodium by gradually removing salt, using salt substitutes or grinding salt into small particles that contact the tongue in more places.

That’s because salt is one of only three ingredients in Lay’s Classic potato chips (the others: potatoes and oil). Reducing the amount or using substitutes would alter the chips’ flavor, said Greg Yep, a global research and development vice president.

So PepsiCo had to come up with a way to deliver the same saltiness while reducing sodium. Prodded by a U.K. government salt-reduction campaign, it first slashed sodium 25% in its seasoned Walkers crisps in 2006, replacing some of the salt with other seasonings and using smaller salt particles.

But those methods couldn’t be used on plain Lay’s chips, which couldn’t mask the changes with seasonings. The smaller particles gave a hit of saltiness that was intense but too fleeting.

Instead, working with scientists at about a dozen academic institutions and companies in Europe and the U.S., PepsiCo studied different shapes of salt crystals to try to find one that would dissolve more efficiently on the tongue. Normally, only about 20% of the salt on a chip actually dissolves on the tongue before the chip is chewed and swallowed, and the remaining 80% is swallowed without contributing to the taste, said Dr. Khan, who oversees PepsiCo’s long-term research.

PepsiCo wanted a salt that would replicate the traditional “salt curve,” delivering an initial spike of saltiness, then a body of flavor and lingering sensation, said Dr. Yep, who joined the company in June 2009 from Swiss flavor company Givaudan SA.

“We have to think of the whole eating experience—not just the physical product, but what’s actually happening when the consumer eats the product,” Dr. Yep explained.

The result was a slightly powdery ingredient that tastes like regular salt. Small groups of U.S. and U.K. consumers couldn’t tell the difference when comparing the two salts on chips last summer, PepsiCo said. PepsiCo declined to give details while the new salt is in development.

PepsiCo is gearing up pilot manufacturing at its Frito-Lay headquarters so that it can conduct wider consumer testing and fine tune the technology.

It could take two more years before the new salt is introduced, Dr. Yep said. In the meantime, PepsiCo is reducing the salt in new versions of seasoned Lay’s such as Sour Cream & Onion this year by an average of 25% by switching to natural ingredients and rebalancing other flavors so that less sodium is needed.